Income Tax (Trading and Other Income) Act 2005 section 172D

Disposals not made in the course of trade

Section 172D deals with how trading stock must be valued for tax purposes when it is disposed of outside the normal course of trade, such as when it is given away or sold to a connected party rather than to a regular customer.

• This section applies when trading stock is disposed of otherwise than in the course of trade, provided section 172B (trader appropriating stock for personal use) does not apply
• The open market value of the stock at the date of disposal must be brought into the profit calculation as a trading receipt, regardless of what was actually paid for it
• Any actual consideration received for the stock is ignored for the purposes of the profit calculation
• The deemed receipt is treated as arising on the date of the disposal, and the section is subject to the transfer pricing rules in section 172F